Introduction
Mr Speaker, I beg to move that this House calls on the Government to review its policies so as to lower cost of living pressures on Singaporeans and their families.
Mr Speaker, on the occasion of the new year in 2022, the Workers’ Party identified cost-of-living as a major pressure point for low to middle-income families, which strikes most acutely the families with both young children and aged parents to care for. In the same message, the Workers’ Party committed to tracking how the Government upgrades its legacy schemes for, and I quote, “the circumstances of today and tomorrow, not yesterday.” (Unquote).The reality of the pressures faced by low and middle-income Singaporeans was repeated in the Workers’ Party’s May Day message that same year.
On May Day this year, the Workers’ Party warned that Singaporeans were living through one of the most rapid cost of living rises in history, eroding the purchasing power of their wages. And finally, in our National Day message this year – celebrations which also saw a remake of Dick Lee’s 1998 hit, Home – the Workers’ Party noted that just as the remake of Home comes at a time when Singapore and the world are at a different juncture from a quarter-century ago, our national policies also need to be re-examined to make them relevant to today’s Singapore.
On cost-of-living, the Workers’ Party acknowledges the one-time reliefs extended to eligible households, most recently on the back of the announcement by the Public Utilities Board (PUB) in late September of an increase in water prices.
For the purposes of this motion, the Workers’ Party will look into possibilities of further reducing cost of living pressures by way of policy change. This House must leave no stone unturned, because for some Singaporeans this has become a cost-of-living crisis.
My speech is in three parts. First, I will cover the situation facing Singaporeans on the ground, particularly for workers, seniors and their families. Second, I will cover some policy areas where the Government can explore the prospects of lowering costs for Singaporeans. Finally, I will outline specific policy areas which will be expanded upon by Workers’ Party MPs, where policies can be changed, enhanced, revisited or even overhauled, so as to lower cost-of-living pressures for Singaporean families.
The Cost of Living situation on the ground
First, the cost-of-living reality facing Singaporeans. MAS’ inflation outlook tells us that inflation has slowed across a broad range of goods and services and core inflation is projected to come down to between 2.5-3% by December, lower than its 5.5% peak in January.
However, from our ground outreach, and from feedback received by the Workers’ Party, cost-of-living worries for Singaporeans are clearly moving in the opposite direction. This is understandable, as there is a chasm between, on the one hand, headlines that says inflation is stabilising, while on the other hand, price rises continue to hit Singaporeans hard. The parliamentary reply by the Ministry of Manpower this morning of a 4.5% fall in real median income in the first half of 2023 is consistent with this emotion.
The Consumer Price Index, which measures inflation, only covers household consumption expenditures and does not include non-consumption expenditures such as loan repayments, the purchase of property including HDB flats, monthly mortgage payments and credit card debt payments. Interest rates are often accompanied by price increases, and loan interest rates remain high. What was cash-in-hand not too long ago has now, and in the future, to be used for interest payments. This reality reinforces the view that prices are galloping away and that incomes are struggling to catch up.
It is also important to consider the compounding effect of price increases with costs passed down from enterprises to consumers. The breadth and depth of the rise in prices also vary considerably since consumption patterns differ for every household.
For example, a household with young children will be sensitive to rising tuition and enrichment-class costs, in addition to the other expenses that accompany raising a child. Singaporeans who need a vehicle for their work are understandably more sensitive to COE, diesel, and petrol prices. On the other hand, food prices account for a large proportion of income at the lower strata of society, and so when a plate of chicken rice or noodles goes up by $2 to 3 dollars, and coffee prices shoot up far more than increases in water prices, the pinch for low and even middle-income Singaporeans is real and painful. When income growth cannot match this rise in prices, it is perfectly understandable why Singaporeans feel nervous and anxious. In some cases, this may even lead to the deterioration of their mental health.
Mr Speaker, a forum page letter in the Straits Times of 27 Sep 2023 was titled – Cost of Living: More help needed for lower-income families affected by rising prices. The letter put into words the worries of many Singaporeans – that the rising prices of goods and services that began right after the COVID crisis would trap Singapore in a vicious circle of unending price increases. For example, and I quote, “The transport fare and GST increases are likely to trickle down into higher operating costs for all businesses, including hawkers and coffee shop operators, who will then be compelled to pass on the incremental cost by raising their prices to remain profitable and to survive…(and it goes on), life can be become challenging and stressful in an inflationary environment. With reduced real income and purchasing power, some low-income families are prone to becoming dysfunctional, resulting in domestic conflict and disharmony.”
The Government rolled out a $1.1b support package late last month, around the same time the PUB announced a hike in water prices. One oft-quoted economist expressed surprise at the timing of the announcement of the support package, and suggested that the Government was confident of funding it from better-than-expected revenue collected. This would explain why it was able to announce the measure halfway through the fiscal year. He said, and I quote, “from a political standpoint, it shows that the overall fiscal position of the Government is strong enough to be able to give some back earlier, before the Budget”.
Mr Speaker, this off-budget package and the Government’s current fiscal position calls into question the necessity of a GST hike next year. The PAP’s argument is that a GST hike is necessary and that this is a political decision it has taken. My co-sponsor for this motion, Sengkang GRC MP Louis Chua will speak more about this. But given the inflationary environment and the substantial effects on the ground, the Workers’ Party calls for a review of this decision in light of the cost-of-living crisis. Like the many other increases announced over the last month, there is real concern that a one-percent rise in GST will have yet another knock-on consequence on prices on the ground from January next year.
The contributions of the Workers’ Party in this debate will move beyond one-time fiscal handouts and explore possible structural changes to existing policies to reduce cost-of-living expenses for ordinary Singaporeans who will live in an elevated inflationary and interest-rate environment for some time to come. Individually, the Workers’ Party MPs’ suggestions will understandably be specific to a particular policy area.
Taken as a whole, they point to the possibility of instituting significant structural adjustments to policies that account for the reality of today’s and tomorrow’s cost of living environment, especially for low-income groups and those in the sandwiched middle-class.
Revisiting the Water-Price Tiers
I now move to the next part of my speech. Mr Speaker, I believe we can better align domestic water tariff tiers to actual consumption by households, with a view to reducing water bills for households that conserve water.
The last time domestic water tariff tiers were restructured, it took place over 4 years from 1997-2000. At the end of that exercise, water prices went up more than 120%. A major impetus for that price hike was the argument that Singapore would be short of water after the expiry of the 2011 Water Agreement with Malaysia. A parallel objective of the exercise was to get Singaporeans to treat water as a precious and strategic resource, and to make water conservation a way of life. Waterborne fees were also raised to recover the cost of wastewater treatment.
Prior to the year 2000, the water tariff regime for households had three tiers to correspond to different consumption levels. The three tiers of water prices for domestic use were as follows: Households that used 0-20 cubic metres followed by those that used 20-40 cubic metres, and a final category catching any households that used more than 40 cubic metres. After the water pricing restructuring exercise from the year 2000, the Government did away with three tiers for domestic users and proceeded with only two-tiers.
A household today is charged differently only if consumes more than 40 cubic metres a month. If you consumed below 20 cubic metres of water a month, you will be charged at a rate between 0-40 cubic metres since there is no specific tier between 0-20 cubic metres of water anymore.
Arising from the changes in the year 2000, the Government decided that it was not going to continue charging households at the lowest rate tier because these households were not subject to the Water Conservation Tax.
Based on publicly available information I have perused, there was no argument canvassed for specifically moving away from a three-tier to a two-tier water pricing regime for households beyond general statements of intent and it was not explained why an increase in the Water Conservation Tax could not be imposed for those consuming between 0-20 cubic metres of water per month to cohere with treating each drop of water as a precious resource. However, arising from the low amount of Water Conservation Tax paid, it was advanced that households in the lowest domestic tier had little to no incentive to save water.
Prior to the changes to the water pricing structure in 2000, about 56% of Singaporean households used less than 20 cubic metres of water and paid no Water Conservation Tax. 34% of households paid for water at the next tier which was between 20-40 cubic metres of water, with a low Water Conservation Tax. The 10% of households that consumed more than 40 cubic metres of water paid a smaller Water Conservation Tax (15%) than non-domestic consumers (20%).
The latter was deemed by the Government to be an unsatisfactory state of affairs as large non-domestic water users or businesses were assessed to often recycle a large proportion of the water they used and were not necessarily more wasteful than large domestic users. The government argued that the existing pricing structure would jack up business costs and affect Singapore’s business costs and competitiveness, and would also fail to have significant effect on smaller households paying lower domestic rates.
Compared to 56% of households in the past who consumed between 0-20 cubic metres of water, today 96% of households are consuming between 0-40 cubic metres of water with HDB flat dwellers consuming 16.2 cubic metres per month in 2020. Evidently, these HDB households in particular are paying for water at the lower of the two tiers, but this supposedly lower tier captures users within a very wide pricing band of 0-40 cubic metres.
I call on the Government to look into the prospect of restructuring of water pricing tiers so as to more accurately reflect water usage with a view to incentivise water conservation and lower costs for households.
The current two-tier compared to the legacy three-tier structure for domestic users does not fairly reflect water consumption patterns. In fact, a case can be made that it puts a heavier Water Conservation Tax burden for the majority of users, whose overall consumption patterns are already located at the lower half of the current 0-40 cubic metres band.
To this end Mr Speaker, I ask the Government to look into the introduction of a fairer and more acutely tiered tariff structure reflecting actual consumption of water from 0-10, 10-20, 20-30, 30-40 and 40 and above cubic metres with a view to encouraging greater efforts at water conservation.
This should be coupled with a graduated Water Conservation Tax regime, starting at 30% for those consuming between 0-10 cubic metres of water and hitting 60% for households that consume between 30-40 cubic metres of water per month, so that households that consume more water, cross-subsidise those that consume less. A graduated Water Conservation Tax across the various tiers would incentivise water conservation and continue to serve the policy purpose of ensuring that water is continually treated as a scarce commodity. With this more accurately tiered water-pricing regime, the quantum of fiscal support provided through GST U-Save vouchers can be reduced proportionately.
Under such a fairer tariff structure, the 96% of households consuming less than 40 cubic metres of water today would be charged a Water Conservation Tax that more progressively reflects how much they actually consume. These households ought to see a reduction in water charges.
Mr Speaker, in contrast to households, non-domestic users are charged a flat rate with a lower Water Conservation Tax than the current upper-most tier for households. The Government should look into this state of affairs from a fresh perspective and assess if tiers can be introduced for businesses for a fairer and better deployment of the Water Conservation Tax, with a view to better support SMEs that can potentially be incentivised to use less water where possible. As public information for the use of water by different types of businesses is not readily available, this would have to be explored further to determine how to make the Water Conservation Tax promote behavioural change for different types of non-domestic users. Introducing tiers for non-domestic consumers would equalize the expectation of water conservation as a shared objective of households and businesses.
To this end, it is useful to recap where we were and where we are in our water journey. Under our Green Plan 2030, Singapore’s Blueprint for a more sustainable future that sets out our green targets, Singapore aims to reduce household water consumption to 130 litres per person per day. In 2021 it was at 158 litres.
As recently as 2017, PUB sought to reduce consumption to 140 litres per person per day by 2030 but the reality of climate change has necessitated the drawing up of new and lower targets. I would advance that lowering the Water Conservation Tax for households that conserve more water under a more finely determined tariff structure would promote behavioural change that would also allow us to meet green targets while simultaneously lowering costs for end-consumers.
Other policy changes to address the Cost-of-Living Crisis
Moving on to the prices more generally Mr Speaker, the cost-of-living crisis has not gone unnoticed by Singapore businesses. Some companies have announced “inflation support payments” as cost-of-living subsidies to junior staff. But there are companies that have done more than give one-time support. For example, Prudential Singapore was reported by the Business Times to have improved medical and outpatient benefits such as dental consultations and outpatient specialist treatments, including alternative treatments.
These enhancements to existing schemes were in addition to wage adjustments to match inflation and market competitiveness to support employee groups most affected by rising costs. DBS Bank for has enhanced the POSB-HDB’s home loan package with an all-in interest rate of 2.6 percent per annum, for borrowers with a monthly income of S$2500 and below. Sir, if businesses can adjust their policies beyond one-time support, the Government certainly can do more too. In this light, as advanced by the Workers’ Party, I reiterate the call in this motion for the Government to review all its existing schemes, make them fit for purpose in this heightened inflationary environment, so as to better support Singaporeans against the onslaught of prices, which is destined to continue unabated particularly with the upcoming hike to the GST.
Take the example of the Workforce Income Supplement (WIS) which was extended to workers aged between 30-34 last year, including a $200 increase for workers earning a gross income of $2500 and below. Sir, the WIS is currently split into 40% cash and 60% CPF contribution. If one is self-employed, the cash component of WIS is only 10%, with a 90% Medisave contribution. Sir, it would be useful to consider a shift in the weightage of the WIS for our low-income workers in this period of heightened inflation in favour of a greater cash payout. As wages traditionally do not move as fast and in significant quantums for Singaporeans at the lower deciles, additional cash in hand will provide much needed relief for our workers who are sensitive to the needs of the hour. A few hundred extra dollars for seniors who continue to work and for whom WIS payments are pegged at the highest tiers, can make a world of difference to their lives.
Finally, before the advent of COVID-19, I had asked the then Senior Minister of State for the Ministry of Health to look into whether it was possible to raise the amount of Medisave monies older Singaporeans were able to utilise for outpatient treatments, and possibly to peg the withdrawal limit to how much seniors have in their Medisave accounts.
Arising from a parliamentary question filed by Ms Hazel Poa in late 2020, we know that individuals aged 85 and above have on average about $6300 left in their Medisave accounts upon their demise. A more acute set of data was presented by the Ministry of Health arising from a PQ by member Patrick Tay. This data revealed that for Singaporeans who passed away aged 85 or older between 2017 and 2021, about 20% had $1,000 or less left in their Medisave accounts and 50% had between $1,000 and $10,000 left. Of greater interest is the fact that 10% had between $10,000 and $20,000 left, another 10% had between $20,000 and $30,000, and the last 10% had more than $30,000 left in their MediSave accounts.
Mr Speaker, these numbers indicate there is scope to allow some seniors with healthy Medisave balances to deploy them for their own use beyond what is allowed today. In fact, the aforesaid approach is already taken for the use of Medisave monies with regard to long-term care.
The challenge, would be to find the optimum level that also takes into account the prospect of medical inflation and ensures that there is little to no premature emptying of Medisave accounts. This may be difficult for seniors who, for example, are between 60 to 70 years of age and have less than $10,000 in their Medisave accounts. However, even the limited amount of MOH data I have quoted shows that further loosening of Medisave rules is conceivable. This would help some senior Singaporeans who have to cope with cost-of-living concerns that can be aggravated especially if they are no longer working.
Conclusion
Mr Speaker, I move on the concluding part of my speech. The Workers’ Party MPs will expand on other changes that can be implemented to lower the cost of living for Singaporeans. Sengkang GRC MPs Louis Chua, He Ting Ru and Jamus Lim will focus on housing, healthcare, and transport. Aljunied GRC MP Gerald Giam will cover public transport, while Ms Sylvia Lim will speak about electricity prices and MP for Hougang SMC Mr Dennis Tan will review certain aspects of means testing in our public healthcare system and for help for families with adults with special needs or disabilities. For his part, Aljunied GRC MP Mr Faisal Manap will make a case to introduce social protection steps, and in the name of a refreshed social compact, to adopt a more systematic approach towards tracking the effectiveness of our social assistance programs.
Mr Speaker, I beg to move.